ECM officially announced the sale of CITY Deco building, one of the building in the ECM’s flagship project on Pankrac in Prague. CITY Deco building was forward-sold for EUR 47.3m to CA Immo International and the should be completed by June 2009 as the building is in the construction process now. The proceeds should be used for further expansion of ECM.
As we informed previously ECM mentioned forward selling of CITY Deco building during conference call to 1Q07 figures. ECM mentioned that the offer from CA Immo International was favorable and company sees current conditions in Czech Republic as benefiting the sellers. We estimate that the building was sold for approx. 5.50-5.75% market yield and confirms our opinion that CEE capitals provide less upside than regional cities or capitals in SEE and CIS region. Although the development costs are expected to be some EUR 25.0m, which is substantially less than selling price. Resulting gain is expected to be somewhat squeezed as ECM faces penalties of undisclosed amount due to stepping down from pre-sale agreement related to CITY Deco back in 2004/2005. We see this step from the side of ECM positively, however neutral for today’s trading.